Private Equity Firms Eye Peloton Amid CEO Departure, Cost-Cutting Talks

By John Lopez

May 07, 2024 04:04 PM EDT

Amid the departure of its CEO Barry McCarthy and ongoing cost-cutting discussions, Peloton is reportedly being targeted by private equity firms for a potential buyout. As first reported by CNBC, this move comes as Peloton aims to refinance its debt and reignite growth after experiencing losses for 13 consecutive quarters.

Private Equity Firms Eye Peloton Acquisition Amid Restructuring

According to sources familiar with the matter, several private equity firms have been exploring the possibility of acquiring Peloton, with talks already underway with at least one firm. CNBC tells us that while formal discussions remain uncertain, the firms focus on reducing Peloton's operating expenses to make the potential buyout more appealing.

Peloton recently unveiled a broad restructuring plan expected to slash its annual expenses by over $200 million by fiscal 2025. This strategic move has garnered a positive market response, with Peloton's shares soaring more than 18% in premarket trading following news from CNBC.

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Peloton Pauses Production Of Its Bike As Demand Decreases
CORAL GABLES, FLORIDA - JANUARY 20: A person walks past a Peloton store on January 20, 2022 in Coral Gables, Florida. Reports indicate that Peloton Interactive Inc is temporarily halting production of its bikes and treadmills after a drop in demand for the products.
(Photo : Photo by Joe Raedle/Getty Images)

Peloton Announces 15% Workforce Reduction in Major Company Restructuring Effort

Despite its profitable subscription business, albeit with stagnated growth at about 3 million users., Peloton has grappled with challenges surrounding its costly equipment, including high-profile recalls that have impacted its brand reputation and incurred significant costs. Furthermore, the demand for at-home exercise equipment has waned, affecting Peloton's sales performance.

Peloton announced a 15% workforce reduction to align its spending with revenue, equating to around 400 employees. The restructuring efforts aim to generate savings through layoffs and cuts across various departments, including marketing, research, IT, and software.

However, Peloton's financial woes extend beyond operational challenges. The company currently shoulders a substantial debt load of approximately $1.7 billion, comprising a term loan of $692.1 million and convertible senior notes of $991.4 million.

Despite these hurdles, Peloton remains a significant player in the fitness industry, boasting a market capitalization of slightly over $1 billion. The Financial Times reports that while its hardware manufacturing and shipping processes have proven challenging, digital subscriptions continue to generate strong cash flow.

Peloton faces the looming task of refinancing or paying off a $1 billion convertible bond by 2026. However, sources close to the company expressed confidence in its ability to navigate these financial hurdles successfully.

Earlier this year, Peloton announced a collaboration with TikTok to create a new fitness hub called "#TikTokFitness Powered by Peloton."

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